Home » Uncategorized » Inadequate Consideration Found for Restrictive Covenants

Inadequate Consideration Found for Restrictive Covenants

Instant Technology v. Defazio, Case No. 12-491 (N.D. Ill. May 2, 2014)(Holderman)

Following a growing trend in Illinois Appellate Courts, Judge Holderman determined that three employees of Instant Technology that were employed for less than 2 years could not be bound by restrictive covenants that were contained in their employment agreements.  In particular, the Court held:

Bauer, Marker, and Rehn were all employed by Instant for less than two years.  At the trial, Instant did not prove—or even aruge—that Bauer, Marker, and Rehn received any additional compensation (other than their employment) in exchange for the Restrictive Covenants.  Consequently, under Illinois Law, the Restrictive Covenants are not enforceable against Bauer, Marker, or Rehn.

Interestingly, the restrictive covenants included a non-compete, a non-solicitation agreement, and a non-disclosure agreement.  Generally, while non-compete agreements and to a lesser extent non-solicitation agreements are routinely struck down, non-disclosure agreements are generally upheld.  However, recent trends in Illinois law tend toward requiring at least two years of employment to enforce any restrictive covenant.

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